Monday, December 25, 2017

In the middle of 2015, an article that appeared on this site touted the idea that a hard landing scenario was not out of the question and the possibility of such an occurrence should not be underestimated. It was based on the idea that QE and low-interest rates had run their course and played themselves out. Since that time central banks and countries around the world have added more fuel to the fire which has postponed the day of reckoning. This has made all of us thinking the market was about to turn south looking rather silly and underlines the fact that trying to time events is both confusing and complex, this is especially true when it comes to the financial part of our lives. Those who watch closely will notice that even small changes in the laws and rules can have a big impact on how things unfold. A lot of strange almost bizarre theories are floating around concerning our economic future. This means that on occasion it is wise to step back, take a deep breath, then try to sort out what is really happening in the economy.

The idea the economy will simply be able to adjust and grow its way out of many problems we have tried so hard to ignore is asking a lot. The idea it will thrive deifies what history has taught. The idea we can just muddle along is very simplistic. It is based on a view of history that often overlooks the many who have "lost it all" in prior periods of economic chaos. As we focus on the fact the system always moves forward we tend to forget how it has a way of sacrificing many investors for the "better good", this is fine if you are not one of those being sacrificed. This means we should not be blind as to other less optimistic scenarios concerning our economic future. A key assumption of the current "escape velocity" mantra is that we have all the time in the world to deal with our problems, it discounts the notion that forward progress may at any time be fouled by events often beyond our control. This feeling all is well is strengthened by the government's optimistic projections and numbers that fail to recognize how another recession could skew future tax revenue and cause spending to soar.

Computer Screen Of Inaccessible Sites!

To the left is an image posted on a website on the morning of Monday, June 29th, this was at a time concern over a default by Greece ran high. In many ways, it might be considered a warning or a cautionary tale that investors should heed.It shows dozens of servers as being "inaccessible" and is an indication of how fast things can lock-down when things turn ugly. Take this as a warning and solid reminder that we must not allow ourselves to become complacent and think we have plenty of time to take action. In our modern world of instant communication, it is becoming increasingly common that options can vanish in a blink of an eye. If we wait too long we may find all doors closed and there is no place to hide.At the time anyone watching closely as the deadline approached for Greece renegotiating its debt with the Euro-zone noted that many people reading about money coming out of the Greek banks were wondering why any money was still even left in these accounts. He went on to say "It is simply another Greek tragedy that so many of the local depositors were merely waiting until just after the last minute to withdraw their funds before joining those already busy hoarding fuel and food." The financial default of Greece could be the thing that fuels the fire that finally brings down the house. If it does not, the light from the flames will surely illuminate and expose the fact that similar flaws and massive debts exist in many other countries across the world.

The theory that we have plenty of time and that another recession does not loom anytime in the future is rooted and based on the momentum model of economic growth. It rests on the idea we will experience a trend of ever-growing year over year increased production. The problem we face today is much of this recovery has been constructed on the unstable base of false demand coupled with new debt and government spending. The easy money policies and artificially low-interest rates of the last decade have simply moved demand forward and created a slew of economic activity that is unsustainable in what would be considered a normal economic environment. This tends to distort prices and lead to overbuilding that often abruptly comes to a painful end.

Much Of The Current Job Growth has Been In Services

Just how far off course we have moved becomes clear when we look at how much of our economic growth has been in the service trades. These jobs often cater to the top 10% of consumers and the people also account for 40% of total spending and 85% of financial assets. The fact is service jobs can rapidly vanish. This highlights that the jobs reports should be viewed as a lagging indicator, but in the present US business world that is dominated by stock market obsession, it has been elevated much as it was in the run-up to 2008. Many people are "over-inventorying" labor by believing that the stock averages are forecasting higher sales and demand around the corner. We should also consider the high ratio of business inventories to final sales which is partly due to low-interest rates which make it easy to stock more goods with little carrying cost. When the markets finally break, we may again witness a hard landing driven by the dual liquidation of excess labor and stockpiled goods.

Friday, December 15, 2017

Apple and Amazon share an ugly truth and that is their strong
ties to America's government has in many ways allowed them to create a
persona or facade that far outshines reality. This allows each company in
its own way to exploit us while masking the huge amount of income they
pluck from our government on all levels. Years ago I penned an article titled, "The Poison Apple" where I questioned how Apple remains the darling
of so many Americans while stories continue to surface on how those
they have contracted to make their products abuse their workers? This coupled with the
widespread criticism for its environmental practices and tax avoidance schemes would
have caused major damage to the corporate image of most companies
resulting in large protest outside their offices and massive boycotts of
their products. We should remember, Apple is a company that Fortune
magazine has called the most admired company in the United States and in
the world, this is a company that the Economist called a "phenomena"
and questioned if "it was a bubble" even years before its stock price soared.

It is as if people are totally blind to the less
tasty side of Apple that appeared in a 2006 report written on working
conditions at factories in China where the contract manufacturers Foxconn and Inventec produced the iPod. The article stated that one complex of factories
that assembles the iPod and other items had over 200,000 workers, that
lived and worked in the factory. Employees regularly worked more than 60
hours per week making around $100 per month and were required to pay
for rent and food from the company. This generally amounted to a little
over half of the workers' earnings. Add to the history of
worker exploitation the fact that since Apple manufactures in China it
creates few jobs in American. Is the typical Apple user so self-centered
that they just don't care, or do they lust for the product so much that
they bury and ignore their social conscience? These consumers are even
willing to pay higher prices to lock themselves into a closed system
tightly controlled by Apple.

For a moment let us put aside Apple and explore some of Amazon's corporate tactics as well as some of the recent stories and the evergrowing political tilt of the Washington Post which is owned by Amazon's CEO Jeff Bezos. Lurking in the back of my mind is that it was the Washington Post and
not a newspaper located in Alabama that broke the Roy Moore story which
has turned many women against the Republican party. Because of Amazon's strong ties with the government and what is often referred to as the "deep state," we should be concerned about whether certain forces are making a concerted effort to shape public opinion. It must be noted many of these parties appear to be at war with our current President. This brings up the question of just how much of the Roy Moore story that has had huge ramifications across society is a coincidence or if a strong hidden agenda is at play.

Bezos Has Moved Into Shaping Public Opinion

Jeff Bezos, the founder of Amazon has indeed had a good 2017 and
in the last few weeks, he has claimed the title of the worlds richest man.
Among the goals of this online retail mogul is replacing workers with
robots which his company will both build and market plus controlling one
of the most influential news media giants in America, the Washington
Post. This high-flier is also the head of Blue Origin, a company with
big plans to pioneer the frontier of space. Last but far from least as
Amazon's CEO Bezos ties this all together with Amazon Web Service or
AWS. This is a cloud service which also collects data and has strong ties to the government. This means they know when you are sleeping, they know
when you're awake, they know when you are bad or good. This all constitutes a great deal of power in the hands of one man.

As to the common link these companies share, both receive and feed at the tit of our government and receive a great deal of American tax dollars. We should never forget that in America the government and schools use
taxpayer money to buy countless numbers of Apple products produced in China adding to Apple's credibility and helping to
carry tax evading Apple to the next level. While this is happening the United States Postal Service bends over backward to deliver Amazon products at a loss and the American government pays out billions to AWS for its services in collecting and storing data on American citizens. This money adds to Amazon's war chest and feeds its ability to continue exploiting the brick and mortar stores that line the streets of our communities. These are the real businesses that provide jobs to millions of Americans. All in all, it is a bit ironic that so many people are infatuated with these two companies that seem hell-bent on taking far more from us than they are willing to return. To us not so
enamored with these two companies the fact is, we just don't get it.

Sunday, December 10, 2017

It could be said that people are naive if they do not recognize the distinct advantage a state-driven economy has over free enterprise, at least initially. A bit predatory in nature, such a system can quickly exploit the weaknesses of its competitors, however, a major flaw is that over time a state-controlled system pays dearly in that they are not responsive to consumers real needs or trends. Such systems also fail to react accordingly to market change thus squandering their resources. The crux of this article is that it is important we recognize China is a state-run economy based on a business model that is geared to expand by crushing the competition. Subsidizing those companies working within its system in a multitude of ways helps it achieve this goal.

For years China has been a place were corruption has flourished, partly
fueled because any appearance of growth has been rewarded. Also, the rules protect the politically connected. Donald Trump recognized this and rallied those Americans that have been harmed and most affected by globalization and the "China effect" to
put him in office. Trump's so-called base is made up of supporters many
of which have lost their jobs or seen wages stagnate over the years.
This sometimes referred to as the hollowing out of America is something that has occurred across a broad swath of the country as
greedy companies have exploited the concept of "free trade" by having
the products they sell in America manufactured in China using cheap
Chinese labor.

Now Airborn The C919 Will Be A Major Player

Three articles that appeared on this site over the last year support my argument that China is not our friend and that we had better
be on our toes. The first explored how China was ramping up its fledgling aviation industry and how when it hits its stride we can expect cutthroat competition. The article warns that as
China's aviation industry takes flight over the next decade America may
be saying say
goodbye to a big chunk of its exports in this field. The Chinese manufacturer claims the
twin-engine, narrow-body design of the C919 is superior to its
competition the Boeing 737, the best-selling jetliner in the
world, and its competitor, the Airbus A320. COMAC (Commercial Aircraft
Corp. of China) also says it can bring the C919
in at a price lower than the $50 million range that Boeing and Airbus
charge for each of their planes.

On
Chinese President Xi Jinping's first state visit to the USA, he made a
couple deals said to help foster relations between the two
countries. One was to order 300 Boeing aircraft for $38 billion, this
was tied to Boeing building the first "aircraft completion plant" in
China, it was to be Boeing's first non-U.S. plant. Considering
China's knack, or shall we say, history, of taking advantage of sucking
production ideas from manufacturers this move was a watershed event to
many industry watchers. As noted above China is now in a far better
position to realize its dreams to develop this industry because part
suppliers such as GE, Pratt & Whitney, and other firms
are eager to supply the engines and other key components. The politics
of globalization a few years ago have paved the way forward and makes
China's effort to produce planes far more likely to succeed. With China's experience of building cities from scratch, why build just
one factory when you can build twenty? This means we should not expect
this industry to grow organically but it is logical it will be
engineered by an aggressive government with a mission.

Chinese-Bullet-Trains On Display

The
second deals with the company formed in a recent merger of
China’s two largest train makers this means the production of railway
locomotives, bullet trains, passenger trains and metro vehicles. It
points out that no effort is being made to deny that the impetus for the merger of China CNR Corp and CSR Corp in 2015 was the quest for a deeper push into overseas markets. Proof of its
ability to compete is that it has been able to win by a wide margin
nine-figure contracts, such as the supply of metro cars to Boston and
LA. It should also be noted that CRRC recently formed a consortium with Bombardier that allows it to
compete for the renewal of the New York subways where it appears they
are currently in the lead to win the contract that should amount to
around $1.5 billion dollars.

The third article warns that when you closely examine America's trade deficit with Mexico it becomes even more disturbing. When following the money the United States huge trade deficits you begin to understand the money eventually ends up in China. When you start thinking about all the money and
jobs we shift into Mexico each year you would think by now Mexico would
be rolling in cash, however, a bit of research quickly confirms that the
money Mexico receives by way of trading with America quickly passes
through its lands and flows to Asia.It could be argued that when all is said and donewe
are still transferring our wealth to the far east only by the scenic
route and each year the numbers are huge. The US trade deficit widened to a shocking 48.7 billion dollars in October of 2017.

It does not take a great deal of
foresight to realize that America is on verge of giving up its role as
an economic leader if it continues on its current path. Those who
surrender to the idea America is too small to lead based on population
numbers do not understand that quality beats quantity hands down. Sadly
the spirit of, "I will gladly pay you Tuesday for a hamburger today" is
alive and well in many of those advocating free trade and the expansion
of globalism. Whether driven by
greed or suffering from being short-sighted, buyers of the many products we import each year should resist
giving up their futures so that we can buy the latest fancy flat screen
television or set of patio furniture made in China for far less than one
made in America. Countries that export goods at slightly below cost in
exchange for manufacturing jobs are not stupid they are predatory and we
in America are their prey.

Saturday, December 9, 2017

It appears Washington is again prepared to ignore the deficit and growing national debt and press forward on more "important" matters. Consider how small an issue this was for most Republicans when they passed their tax bill. America is already over twenty trillion dollars in debt and it was projected that debt would grow another ten trillion dollars over the next decade, so is adding another one and a half trillion more during the next ten years such a big deal? Apparently, Congress has decided that it is not and so has the president which is confirmed by his recent tweet.

We are one step closer to delivering MASSIVE tax cuts for working families across America. Special thanks to @SenateMajLdr Mitch McConnell and Chairman @SenOrrinHatch for shepherding our bill through the Senate. Look forward to signing a final bill before Christmas!

Sadly, for most Americans this so-called "Massive tax cut" will be mostly an illusion and so will the idea that Washington has truly reformed our hellish tax system which is in need of major simplification.

Several years ago America negotiated or shall we say, was able to survive the financial cliff (a combination of expiring tax cuts and across-the-board government spending cuts that were scheduled to become effective Dec. 31, 2012) and muddle through what was described as a draconian sequestration. This has emboldened many Americans and left them feeling immune to economic reality which has put us on the part towards financial disaster. A rising deficit that has yet to yield dire consequences has given the American people a false sense of security. It is also clear that running up debt is far easier than paying it off. We should also be aware that figures released by the U.S. Treasury are for public consumption and it relies on accounting tricks which massively understate how much debt is really being accumulated. The myth that a scenario of growth coupled with a falling deficit will allow us to outgrow many of the problems we face brings with it a false optimism and hope.

Estimates Have Been Very Very Wrong

It is important to remember predictions of future spending and revenue often turn out to be wrong. The chart to the right predicted that by 2019 the national debt would top 12 trillion dollars. Projections made by the government or any group predicting budgets based on events that may or may not happen at some future date are simply that, projections or predictions and not fact. This means that such numbers are totally unreliable.Sadly, when President-elect Trump taking office in early 2017 the National Debt Clock was ready to breach the 20 trillion dollar mark. This means the deficit during the Obama years ran at over twice the nosebleed levels that had been projected. Yet, this appears to have raised no red flags as we continue to hear from the media how robust economic growth has helped push the U.S. budget deficit down. These claims bantered about by Washington and the media have helped push the stock market into new territory and reassured America that all is well.

We often confuse and muddy the waters when we talk about the debt, one way we do this is to emotionally charge the issue by seeking which administration or President is to blame. While Bush left office with the economy in the sewer most the resulting deficit occurred on Obama's watch. Over the last few years, the Obama administration has touted how the deficit is dropping and the economy is on the mend. Don't expect a chart put out by somebody with an agenda to clarify this issue, long ago I learned that looking at a chart to see how we are fairing can be very deceiving, little things like the scale or how they are colored often blur how we interpret their message. This has led some Americans into thinking the worst of our problems are now in the rearview mirror. One thing is clear and that is only by looking back decades do we see just how large this problem has grown.

As things stand America continues to rack up a deficit each year of nearly $2,500 for every man woman and child in the country, such deficits were unheard of in the past unless it was during a major war. Deficit spending has been accomplished by borrowing money that will become a long-term drag on the economy going forward. To make matters worse the government has fiddled away the time in deadlock rather than pursuing the structural reforms we so desperately need. This means much of this money has been poorly spent in ways that do little to address the deep problems that plague our economic future. Even the tailwind of lower energy cost through the massive expansion of oil and natural gas supplies has not been enough to move the economy forward. Much of what we have seen should be considered a "one-off" that is behind us. Bottom-line all this trickles down to job growth which has been nothing to brag about when you consider many of the positions being created are not "quality" or even full-time jobs.

Even though we have seen deficits reach unprecedented levels the deficits in our future will be dramatically worse. Any claim that Washington has the budget deficit back under control is a total lie. We are currently mired in the midst of the greatest government debt bubble in the history of the world. By our actions or lack of action, we are destroying the future of this nation. Only when we use the massive 2009 deficit as a baseline are we given the impression the budget is back under control, it is clear that 2009 was an unplanned budget disaster and should never be used as our reference point. The ugly truth many people choose to ignore is that starting in 2017 entitlements will become the driving force that carries the deficit higher and higher into nosebleed territory.

The fact is with the artificially low-interest rates of today many people seem to have little desire to cut spending. We are literally gorging on debt, and most Americans seem to think that it is just fine and dandy to wildly run up debt as if there is no tomorrow. Way back in2011, the "Gang of Six" committee’s bipartisan plan proposed three dollars of budget cuts for every one dollar in tax increases, after much tough talk this has all been forgotten. The irony is that today lawmakers are again looking at boosting spending on both defense and infrastructure programs at the same time they cut taxes.

If you want to know what the real budget deficit is, all you have to do is go to a U.S. Treasury website which calculates the U.S. national debt. Below you will find the amount of debt outstanding on an annual basis from 2000 through 2015. This includes legal tender notes, gold and silver certificates, etc. The first fiscal year for the U.S. Government started Jan. 1, 1789. Congress changed the beginning of the fiscal year from Jan. 1 to Jul. 1 in 1842, and finally from Jul. 1 to Oct. 1 in 1977 where it remains today.

Sunday, December 3, 2017

With the passage of time, things change and evolve. This transformation can be seen in both society and the economy. Over the decades we have moved from an agricultural based society to an industrial centered manufacturing way of making a living. Now, without a doubt, we are moving solidly in the direction of technology becoming the main driver of cultural change and with it, the economy is again undergoing a metamorphosis. With the passage of time, we tend to forget or minimize in our minds what is too painful to remember and the way we were during times where growing pains battered us at every point. While we are undergoing this latest transformation and all the noise that accompanying it I ask you to consider the possibility the important adjustments the economy must make are lagging far behind our current "financial culture" or that the economy has evolved in a way that simply no longer works.

The Titanic Was Herald As "Unsinkable"

Much of this has yet to become apparent to the masses and is masked by
institutions papering over problems and a tradition of optimism that has
served mankind well, however, something seems to be broken or out of
kilter. When we look behind the curtain it is difficult to ignore the numbers simply do not
work going forward. Ignoring the warning signs on the horizon does not
make them go away and kicking the can down the road can only delay the
inevitable for so long. Many
of the comments I read concerning the current stock market and companies such as Tesla and Amazon remind me of the following
statement, "Not even God himself could sink this ship." that an employee of the White Star Line made during the launch of the Titanicon May 31, 1911. The truth is as we move forward we are in uncharted waters at any time a surprise might shock us into the reality.

Much of the economic distortions we are experiencing today harken back to President Richard Nixon's decision on August 15, 1971, to close the gold window. It is a factor that changed everything. While US citizens had been forbidden from owning gold or from
redeeming their gold certificates for gold coins since the early 1930s,
foreign governments still had the privilege of redeeming their dollars
for gold. Nixon's decision untethering the dollar from gold and releasing it from the promise dollars could be redeemed in gold, this resulted in opening the floodgates and allowed credit to explode from $1.7 trillion to $65.5 trillion at the end of 2015.

Exploding Credit Has Massive Ramifications

A question we must ask is just how relevant today's comparisons are with prior
economic cycles? The situation today is in many ways "historically unique" due to the rampant expansion of credit in recent decades. Much of this has flowed from Nixon's
decision to close the gold window and may be greatly responsible for the
rising income inequality that has occurred in recent decades. After inflation soared in the late 70s America found the cost inflation in goods could be reduced by buying these things from low-cost producers located in other countries. This means imports soared.

A de facto policy of placing no restraints on trade
deficits due to the removal of the gold window has encouraged the
outsourcing of jobs. This policy dovetailed with America's decision decades ago to make China into a formidable ally that would act as a counterbalance against Russia and the Kremlin. We did this by offering economic
incentives and help to China's economy, looking back this was a watershed event which changed the way American companies conducted business. It has resulted in American companies outsourcing production and the mass exodus of manufacturing jobs from America to distant lands where labor was both cheap and abundant. This policy was sold to America's middle-class as a "win-win situation" and we were told the American worker would move up the economic food chain towards better-paying jobs that would be more fulfilling and require less toil. This did not happen.

Many Comparisons With The Past Now Obsolete

Returning to the main theme of this article this massive expansion has rendered many comparisons with the past obsolete. It has also resulted in the economy embarking on a rollercoaster-like experience where it encountered a series of events such as the dot-com bubble, which burst in 2001. In reaction, the Greenspan Fed stepped on
the gas blowing the biggest housing bubble on record. In response to that asset bubble popping, we saw the Fed bail
out the banks, the asset holders and the wealthy. The bottom-line is that in the end, this chain of events
left the average American worse off than before. During all this time debt has grown, and toservice that growing pile of debt the Fed had to keep slashing interest rates. This means that instead of allowing consumers to benefit from technological advances
that tend to be inherently deflationary, the Fed sought to increase
inflation by declaring inflation in the range of 2% to be in our best interest. This has benefited the banks and those already wealthy while at the same time increased inequality.

I came back to finish this article that I started some time ago
because I found myself pondering the line, "outwit and outlast" that is
often used during the popular hit television show Survivor. It occurred
to me the winners in both life and investing often reflect these
qualities and that this game is far from over. While investors are often urged to be cautious the excesses
of today are in many ways not as "sector" oriented as those experienced
during certain periods we have seen in the past and this makes it more
difficult. It seems everything is encouraging and causing both savers
and investors to take far more risk than they should in the quest for
higher returns and yields. The "fear of missing" out is again running
rampant and with the strategy of buying the dip having proven successful
over almost a decade investors have become complacent to the risk they
face.

Sunday, November 26, 2017

Like many people, I was under the impression that Medicare was free and that after the age of 65 at least the burden of healthcare payments would be lifted from my shoulders. President Lyndon Johnson signed the Medicare and Medicaid programs into law in
1965 to cover the cost of healthcare for many Americans. But this does not answer the question “is Medicare Free?” Many Americans share the misconception that Medicare coverage is free. This is generally rooted in the fact that
Medicare part A is indeed free for most Americans, however, more than one part exists to this very complicated program. The dirty little secret is that part A will only suffice or be
enough if you are poor or willing to become poor if you become ill and
run up massive healthcare cost.

Premium-free Part A. You usually don't pay a monthly premium for Medicare Part A (Hospital Insurance) coverage if you or your spouse paid Medicare taxes while working. - Basic Policy

You pay a premium each month for Medicare Part B. Most people will pay the standard premium amount, in 2017 of $134 a month. If your modified adjusted gross income is above a certain amount, you may pay more. - Less Basic Policy

Your out-of-pocket costs in a Medicare Advantage Plan (Part C) depend on, many factors such as range of coverage, where you live, and more Price per month varies greatly. - also known as "Medigap Plans" these plans are designed to pick up cost that Medicare sidesteps.

Rather than being shocked I was disappointed to find out how limited Medicare A is. This means that in order to protect your assets or see you don't get a huge medical bill you still have to carry Medicare part B or what they call "supplements." Generally, anyone that is interested in protecting their
savings and removing the risk of bankruptcy will sign up for the
"optional" part B and very likely more. This means many people have little choice but to make monthly payments that are deducted directly from their Social Security checks. This is a topic many people seem not inclined to talk about or something that those heading towards retirement simply don't want to hear. There are many complex guidelines and laws that have to be examined to
determine the exact cost of Medicare but it is safe to say a program picking up all our healthcare cost is not free. In fact, as we look down the road it appears the path forward is about to become much grimmer.

Medicare Is A Budget Buster!

The Heritage Foundation Reports that,"The rising cost of Medicare is
placing an increasing burden on current
and future taxpayers, as well as exacerbating the poor financial
condition of a program on which America’s seniors depend in their retirement." most Americans know this but have chosen to ignore this
reality or decided to kick the can down the road and deal with the
situation at a later date or just hope for the best. Ironically, making
the cost of rising Medicare cost even more certain is the continued stubborn refusal of the government to let us die, that is why I predict whether you agree or disagree with the idea of euthanasia it is destined to become a major social issue in coming years. With
people living longer and technologies ability to extend a person's life
well beyond where they feel it has any "real quality" the issue of
euthanasia will not go away. Given both the sheer size of Medicare spending and the future
projections, Congress cannot even begin to address America’s crushing
debt without slowing its growth. It should be considered a red flag that currently much of Medicare debt is not
included in conventional debt projections on the nation’s books.

The demographic pressure of baby boomers joining Medicare at the rate of 10,000 per day over coming years will cause enrollment to soar from 50.7 million beneficiaries in 2012 to over 81 million beneficiaries in 2030. Medicare is the fastest-growing program in the federal budget and already accounts for about 15 percent of federal spending. In 2012,
Medicare spending reached $557 billion in 2012, and it is expected
to nearly double in the next 10 years.
Medicare spending accounted for 3.67 percent of the entire economy,
measured as gross domestic product (GDP), in 2011and will rise to an
estimated 5.8 percent of GDP in 2030. The Medicare Office of the Actuary estimates that, under the most
realistic scenario, Medicare has an unfunded obligation of $37 trillion
over the next 75 years.

It is conventionally assumed that Medicare is more efficient than private insurance because it has lower administrative costs but this
claim is somewhat misleading, the public-private comparisons made on its
behalf are often skewed. Medicare patients comprise not only an aged insurance pool, they are
also far more likely to be suffering from chronic medical conditions and
are more physically disabled than the general working population that
is covered by private insurance. Medicare is also the primary
coverage for a special class of patients suffering from end-stage renal
disease. The profile of the Medicare pool guarantees much
higher health spending for its patients than those enrolled in private
insurance. Thus, expressing administrative costs as a percentage of
total program costs driven by this older and sicker population makes the
official administrative costs for Medicare of around 2 percent to 3
percent of claims only appear low.

Most Americans Know Very Little About Medicare

While the government boasts that Medicare has very low administrative costs, they are in fact higher than those
of private insurance even after including money spent on non-administrative functions, such as marketing
and profit. On top of this much higher Medicare costs are generated by high levels of waste, fraud, and abuse within the program. Medicare's complex administrative payment system, combined with
relatively rapid payment of largely unexamined claims has been an invitation
to dishonest providers seeking to game the system at the expense of the taxpayer. The program also transfers a"hidden administrative costs" by shifting to doctors,
hospitals, clinics, and skilled nursing facilities all the hours necessary to comply with
a mountain of Medicare rules, regulations, and related paperwork.

While conventional methods of “cost control” have ratcheted down reimbursements
for doctors and hospitals they have in recent years not been enough. Cuts have hit seniors in the form of
reduced access to care and also shifted the costs of Medicare’s
"below-market payment rates" to younger working Americans in the form of higher premiums for their private health insurance. This almost guarantees that additional conflict will arise between different age groups of our society concerning financial policy over entitlements as the bill for such things
is squarely placed at the feet of today's youth.It is clear that each round of Medicare cost shifting to non-Medicare patients routinely
shows up in higher insurance premium costs for younger workers and their
families.

Sadly, these are already the people who are already paying the bulk of Medicare bills through
their taxes. In any given year, through a combination of payroll and income taxes,
taxpayers finance almost $9 of every $10 spent on the Medicare program but this is an uphill battle. Today a single male who retired at 65 in 2011 and earned the average wage
($43,500 in 2011 dollars) would have paid $60,000 in Medicare taxes but
received $170,000 in benefits, a difference of $110,000. A one-earner
couple, who retired in 2011 and earned the average wage would have also
paid $60,000 in Medicare taxes but received total benefits worth
$357,000, a difference of $297,000. This imbalance contributes to the
Hospital Insurance Trust Fund’s projected financial insufficiency.

Now let's look at the figures a couple I know recently shared with me, these "real life numbers" are not pretty. Both the husband and wife each received about $1,000 each per month and thinking Medicare was free they planned to retire on this income. To say they were shocked to find they would have to continue paying out big bucks after turning 65 and going on Medicare is an understatement. Knowing that it is not difficult to rack up a $100,000 plus bill for a short stay in the
hospital it is no wonder people are both fearful and surprised of what
holes often exist in coverage, even a 20 percent co-pay can result in a
huge bill. In order to protect what they had worked years to save they wereforced into making the ugly decision to take Part B, Part C, and Part D in order to fill in the massive holes in coverage.

While far less than the $20,000 dollar plus healthcare cost they had been paying for a policy with high deductibles the cost of Medicare was something they had not anticipated in their "golden years." The monthly cost of Medicare will leave this couple with a meager $1,200 a month of income. This is not the kind of
retirement income they envisioned being forced to exist on. Fortunately
for them they have over the years cobbled together around one hundred
thousand dollars in savings to supplement this, however, with today's interest
rates having turned an expected 5 percent stream of interest from over $400 dollars a month into a mere trickle of around $50 sure doesn't help.
They
reminded me that many other Americans are in the same boat but a huge number of those people lack any saving from
which they can draw upon in case of an emergency, those are the people in a real pickle.

A few final notes, if you are in a Medicare Advantage plan, also known as part C, you get both your
Medicare Part A and Part B coverage through a private health insurance
company contracted with Medicare. Today, roughly three of four Medicare patients are enrolled in the
traditional Medicare program, this leaves just over a quarter of Americans enrolled
in the more comprehensive part C known as Medicare Advantage. For many people even affording part B is a reach too far and if they have few assets if they do become ill a very good chance exist that the bills will never be paid. As for Part D, it has to do with drug coverage, the high cost of drug prescriptions has become a major expense and concern for many Americans.

After these basic choices, if you can afford it, as usual, other options also are available. All in all my research has brought me to the conclusion that many Americans have chosen to avoid confronting the issue of healthcare in their later years until the very last moment. I also found that like all government programs the Medicare program is massively complicated, flawed and crafted to meet the needs of powerful special interests, this is masked by both its size and nobody really wanting to look directly at a problem with few easy answers. Do not give the government to much credit for crafting a program which will supply older Americans with healthcare at a reasonable price. While the Medicare system may be very difficult to navigate the task pales in comparison to the problems this area of healthcare faces going forward.

Footnote; Few Americans were fans of the recently deceased Cuban El Presidente
Fidel Castro but he did leave one positive legacy and that is Cuba's
quality healthcare system. The poor country of Cuba has managed to
guarantee access to care for all segments of the population and obtain
results similar to those of the most developed nations. The article below delves into
ways we can fix our broken healthcare system.http://brucewilds.blogspot.com/2017/01/healthcare-answers-available-in-cuba.html

Thursday, November 23, 2017

It seems Amazon has made it their company mission to be in our face. Not only that the company has made it their policy to know when you are sleeping, to know when you're awake, to know when you are bad or good through its ties with the CIA and NSA. According to a study by the Institute for Local Self Reliance, Amazon's not about just market share but also social control and the company has already achieved a level of cultural dominance that exceeds anything Walmart ever was able to exercise. Amazon has even taken to cross-company promotions that offer up Amazon Prime for free in an all gloves off effort to expand their customer base and weasel into the lives of those who have resisted its advances.

Logo Shaped Like Upturned Penis, What Do They Want?

The average American who fills their day with texting, watching hours of television, eating junk food, and other activities it is easy not to notice that Amazon is extending its control. Even as we are constantly bombarded by articles about Amazon that are filled with hype masquerading as news few people take the time to think about how powerful and wide-ranging Amazon has become. For all of its reach, Amazon, the company founded by Jeff Bezos in 1995 as an online bookstore, is still remarkably invisible compared to the influence it wields.It is more than the ability to put packages on the consumer's doorstep and providing an inviting interface, Amazon has quietly positioned itself at the center of a growing share of our daily activities and transactions which has allowed it to extend its tentacles across our economy and deeply into our lives.

To say a few conflicts cloud Amazon's future would be an understatement. The company has ravaged America's retail landscape destroying jobs while at the same time enjoyinga slew of taxpayer subsidies. But several of the cozy arrangement they have enjoyed over the years pale in comparison to the deal Amazon is now trying to push through Congress. The technology giant which is no stranger to sweetheart deals that line its pockets at taxpayer expenseis quietly moving in a direction that is destined to create even more controversy. Amazon is on the verge of winning a multibillion-dollar advantage over rivals by taking over large swaths of federal procurement.This makes it increasingly difficult to ignore that the company's CEO Jeff Bezos also owns one of America's leading newspapers, the Washington Post, through which Bezos has embarked on a mission to shape public opinion. When you couple such a voice with a company so deeply involved with discovering and archiving detailed files and information about individuals and the politicians across America you command a great deal of power.

We all know Amazon started out as an online retailer touting low prices and exploited brick and mortar stores across the land but for some reason, the federal government cannot stop giving Amazon, even more, advantages over the stores that line the streets of our communities. One example of how Amazon has found ways to have the government subsidize its operations is how the U.S. Postal Service which has lost $60 billion since 2007 handles last-mile shipping for two-thirds of Amazon’s deliveries and this extends to even delivering on Sunday. This has resulted in overtime for workers and a good incoming revenue number on the USPS’s balance sheet, but in truth, it has been a financial bonanza for Amazon. According to media reports, USPS delivers Amazon packages for $2 each even though it costs USPS $3.46 per package to make these deliveries. And that’s before you get into the $200 million three years ago for 270,000 handheld scanners to process the packages or the $5 billion or more to replace USPS vehicles with those better suited to deliver Amazon’s packages.

Congress has started down the path to change the federal purchasing plan that would result in Amazon’s most lucrative government handout yet. The language buried in Section 801 of the House-passed version of the National Defense Authorization Act would in effect move Defense Department purchases of commercial off-the-shelf products to online marketplaces. The House Armed Services Committee Chairman Mac Thornberry, argues it is needed to save money over the burdensome current system and that some IT equipment could be purchased more cheaply on the open market than through the GSA’s “schedules.” The plan calls for developing an online marketplace platform through which federal agencies can buy products such as paper clips, bottled water, computers, office furniture and more in the same way any business would.

The legislation calls for a platform designed to “enable government-wide use of such marketplaces” which rules out all small players unless they employ a procurement and supply management firm big enough to serve the entire U.S. government by offering multiple suppliers for a massive number of products with constantly changing selection and prices. With all Amazon's influence, it is not an accident that Amazon Business is the company best positioned to exploit what is basically monopoly control over a great deal of the $53 billion in federal purchasing for the commercial supplies bought through no-bid contracts.As to whether this becomes law in the future the fact that Amazon got it through the house should cause us great concern and is proof of their ability to manipulate Washington All this reeks of corruption, a major shift in power, and sets up opportunities for abuse not to mention massive control over suppliers.

Even the suggestion of a pilot program is just another way for Amazon to wedge its foot in the door. It is important to remember by simply providing the platform necessary for companies to sell through to their current customers Amazon would extract money from those third-party sellers and collect billions of dollars annually.Typicallyit receives 15 percent to 20 percent of the proceeds from such sales, which means a huge revenue stream for Amazon for doing basically nothing while vendors are forced to cough up as much as half their margin. This would prove devastating to many small businesses. Amazon would also get an enormous amount of data on agencies which they could then use to identify top competitors and drive them out of the marketplace with increased fees or other rules changes. And it means many discounts that are normally negotiated for bulk rate purchases would flow not to the government and taxpayers but would be diverted into Amazon’s pocket.

The online marketplace provision, which still has to get through a House-Senate conference but with all the power and lobby power Amazon currently holds it has push. It must be noted that as head of Amazon Business’s public sector division, the company hired Anne Rung, who ran the Office of Management and Budget’s Office of Federal Procurement Policy until fall 2016, this is another way of saying the "top purchasing official" in the United States. The hire is a boon to Amazon, which gains an experienced government insider who can help connect the Seattle-based company with huge market opportunities in state and federal e-procurement applications. Considering how Amazon operates it should not come as a surprise they chose a "government insider" to guide them, also we should not be surprised at the significant ramp-up of Amazon Business which only started in 2015 and already has 1 million customers and $1 billion in sales. Recently Amazon introduced Amazon Business Prime, a $499 membership that comes with free two-day shipping for its business-to-business products.

This has tanked the stock prices of its main industrial supply competitors, Fastenal and W.W. Grainger.Regardless of how this plays out on the national level, Amazon has been moving at the local level where in January, the company won a contract with U.S. Communities, a coalition of 90,000 local governments. Ironically after Amazon famously spent years denying the payment of sales tax to local governments it now is a major supplier of local government office supplies. Clearly, Amazon will not be happy until it is the go-to source for all online office supplies and other goods. For those who have seen the damage Amazon's predatory practices have done to so many companies, it is difficult to see this as a good thing.

"JustSayNo" was an advertising campaign, part of the U.S. "War on Drugs" during the 1980s and early 1990s, it was aimed at discouraging children from engaging in illegal recreational drug use and practices that would end up hurting them. The campaign focused on the simple idea of firmly rejecting the allure of the drug culture by offering various ways of saying no. Eventually, the scope of the campaign expanded to cover violence and premarital sex as well as drug use. With a company logo resembling and shaped like an upturned penis Amazon almost screams that its goal is to screw us all, with this in mind, I like many other people have decided to just say NO!

Tuesday, November 21, 2017

When you follow the money the United States huge trade deficit with Mexico becomes even more disturbing as you begin to understand where the money eventually ends up. Some people argue that a trade deficit should have virtually nothing to do with trade policy because it represents only part of the flow of investment funds into or out of the country. I beg to differ because it directly plays into the bigger issue of how much the people of a nation save and invest which is linked to incomes. Even more important is its impact on the value of our currency and our balance of payments which is the broadest accounting of a nation’s international transactions. While the link is tenuous at best it is best we should not underestimate its importance over the long run.

But Where Does The Money Go From There?

When you start thinking about all the money and jobs we shift into Mexico each year you would think by now Mexico would be rolling in cash. Interesting trade deficit data concerning Mexico reveal a fact most people miss. A bit of research quickly confirms that the money Mexico receives by way of trading with America quickly passes through its lands and flows to Asia. It could be argued that when all is said and donewe are still transferring our wealth to the far east only by the scenic route. This is the reasoning behind substantially strengthening NAFTA but in a way that gives a great deal more value to the United States.The true size of our trade deficit with Mexico is difficult to get a handle on, some figures show it as over 64 billion dollars in 2016 while a recent article claimed the number was closer to 74 billion. The numbers below are even uglier coming in around 122 billion dollars, similar numbers were reported on several websites, in this case, it is not so much a question of their authenticity or accuracy that is important but what really stands out is where Mexico sends its trade income. The following numbers show that when it comes to trade in 2016 exports of goods and services made up just over 38% of Mexico's GDP but even with a huge trade surplus with the United States, Mexico still ran an overall trade deficit.

Total Exports (2015)

$380,600,857,434

Total Imports (2015)

$395,232,221,167

Trade Balance (2015)

-$14,631,363,733

Top 10 Export Partners

Export Volume ($)

United States

$309,213,074,619

Canada

$10,544,636,884

China

$4,873,149,273

Brazil

$3,798,897,348

Colombia

$3,668,050,539

Germany

$3,507,894,389

Spain

$3,350,071,944

Japan

$3,017,433,575

Korea, South

$2,770,047,172

France

$2,126,829,759

Top 10 Import Partners

Import Volume ($)

United States

$187,301,416,336

China

$69,987,806,696

Japan

$17,368,173,343

Korea, South

$14,618,851,023

Germany

$13,974,715,875

Canada

$9,947,931,758

Malaysia

$7,463,151,583

Italy

$5,061,646,994

Thailand

$4,957,934,608

Brazil

$4,622,107,445

The math from these numbers indicates that in addition to the United States being a huge importer of goods from China, Mexico also ran a trade deficit with them of around 64 billion dollars. Interesting, while the numbers are not nearly as bad Canada adds another 19 to 36 billion dollars to the wealth leaving the North American continent depending on whose numbers you believe. Canada is considered to be a "trading nation" in that its total trade is worth more than two-thirds of its GDP. As expected the United States accounts for the bulk of its exports of 392,260 billion dollars and 359,915 dollars of imports. This means like Mexico, Canada also runs a trade surplus with the United States but because it runs a deficit with its next three largest trading partners, Europe, China, and Mexico as a percentage it all nets out as nearly a wash.

For years the United States has carried the two countries of China and Japan on our back and enriched them through what often seems like rather lopsided trade arrangements, and during that time we have watched them grow stronger as we have weakened. Those preaching the virtues of globalism and free trade point out that American consumers pay far lower prices because of this but overlook the fact that in the long run such an unbalance will not end well. The bottom-line is that not only directly but even indirectly the United States and the whole North American continent is shipping wealth off to Asia, this means China and Japan are a far bigger issue than the imbalance with our NAFTA partners.

This article ties in with two others recently published. One delves into how China has not been fair in trading with America and how a very strong strategic dimension exists for NAFTA and a powerful regional trade bloc to compete in a changing global economy. http://Nafta And Regional Trade Better than Buying From China.html The second explores the relationship between Japan and China and how it has grown stronger over the years. http://Japan's Strong Economic Link To China.html This tight relationship is apparent each time trouble surfaces in China the yen jumps in value as wealth in a stealth move flees China often through business back-channels. This should not be misinterpreted as the yen strengthening, but rather a temporary bump before the wealth moves on to an even safer place.

Sunday, November 19, 2017

It is very important that small business
failures receive a lot more attention then they
do, we will see a lot of these in the near future as people have started
down this path when unable to find a job. Small business is hard, going
into business is risky, and many people are not up to the task. As a
property owner that leases space to many start-ups I have a keen
interest and knowledge of the microeconomics that occur when a small
business is formed. This includes its effect on the economy both long
and short term. What many people fail to realize is that most
business start-ups having a very short lifespan of just months or around
a year, this means the economy experiences a short-term burst of
spending that is quickly followed by a slew of long-term negatives.

While America claims to want new business formation as a society we are weak in creating policies that support them. We should not underestimate the role new government regulations or
Amazon's exploitation of brick and mortar stores have played in undermining their success. In fact not only has government been complicit in allowing small businesses to be destroyed but in many ways they even subsidize Amazon. Today startups also face the harsh reality that many major retailers plan closing stores. While many people see this as creating new opportunities down the road, short term it is problematic. It is difficult enough for a new venture to turn the corner towards making a profit but semi loads of discounted merchandise flooding a market as a closing outlet liquidates its inventory only adds to the challenge. The pressure resulting from stores closing tends to trickle down affecting all sectors of an economy reducing overall demand for services and casting a wet blanket on demand at the same time pushing down prices.

The Ugly Reality Is Most Businesses Fail

Formation of new businesses is very important to America and the
economy, but a dark side does exist. The study of the anatomy of a
failed business can be very enlightening and can contain some rather mean unintended consequences. When a new business opens or
is formed generally a fair amount of money is spent or invested. The source of this money is often the savings or loans from the owner, their family or
close friends. This explosion of spending that accompanies opening a new business stimulates the general economy. Money spent on fixtures, signage, leasehold improvements, services, and inventory help create jobs, but as stated earlier a dark side exists to this entrepreneurial adventure and it is exposed if the business fails to achieve economic success. When a business fails people often get hurt.

I'm not talking about hurt feelings or simply feeling sad, the ramifications reach far deeper. I'm talking serious
pain of a financial nature. Contracts go unfulfilled, bills are not
paid. Suppliers must take write-offs, and landlords after only a few
months rent and often several months that are never paid, usually get back
buildings negatively altered by unsophisticated novices doing shoddy
work. Utility bills go unpaid and must be written off, those who have
sold services never collect monies promised, yet suffer the upfront cost and investment.
The fixtures and inventory of these failed enterprises often sold at a
discount or trashed become underutilized, or dampen a competitor's
future sales.

And last but not least, let us return to
the psychological damage that
follows in the wake of a business failure. This often turns into shame
as they dodge those they let down, and is often followed by bankruptcy,
destruction of credit, broken families, divorce, loss of one's home. An
entrepreneur who fails often sees years of hard work and all or most of
their retirement savings vanishing into the land of broken dreams. In
the end, the taxpayer and government may end up supporting those who
fail during a business venture and have exhausted their savings and that is a cost and
negative many forget. Whether they retire early without savings or need medical help society can be forced to step in. Long hours of hard work and sacrifice is only
part of the demands and burdens asked of today's entrepreneurs, in fact just going down this path poses its own risk.

Wednesday, November 15, 2017

The whole idea of Washington passing a tax bill that addresses and cleans up some of the gargantuan mess we call a tax code should be looked upon with skepticism. It is quite naive to think legislators polarized and unable to agree upon anything can tackle an issue as complex and divisive as tax reform. Even more outrageous is the idea they can do it quickly. A huge number of issues such as whether to exclude state and local taxes (SALT) remain explosive. As of Tuesday morninglawmakers had submitted some 355 amendments, so much for fast and simple. If anything does come out of all their promises we should have very low expectations as to the quality of reform and whether it will really benefit our country over time by stimulating economic growth.

People often forget that nothing influences and shapes the economy as
much as how we are taxed. Tax laws and legislation are one of the strongest forms of social
engineering and have massive ramifications that shape how people handle their financial affairs. Sadly tax
incentives and the fuzzy math that surrounds them often allow our gutless
lawmakers and politicians to take us down the wrong path. It
should be pointed out that a consumption tax based solely on "goods"
purchased would free many small businesses and labor markets from the
distortion our current system causes and at the same time encourage savings.
America’s lack of savings is repeatedly pointed to as a problem, yet
we tax small savings accounts making them a non-starter.

The Gargantuan Mess We Call Our Tax Code

Like many people, I find it difficult to believe much of the news that flows out of Washington or the words of our politicians. A bit of research shows the Committee for a Responsible Federal Budget a nonpartisan, non-profit organization committed to educating the public on issues with significant fiscal policy impact points out that even a $1.5 trillion increase to over what the debt was projected to increase over the next ten years amounts to almost $12,000 per household and that this is a steep price that we will be passing on to our children. It should be noted that as the national debt doubled and soared by almost ten trillion dollars during the eight years Obama was in office. This means currently the national debt is far higher than anyone projected just decades ago.

What happened to the more reasonable approach where tax reform and a tax cut were two separate items? It is far more intelligent to look at tax reform as a revenue-neutral way to simplify our massively complex tax code. Corporate and individual rates are two separate animals but how they flow and intersect ties them together. Everyone agrees dropping many of the tax breaks built the code over the years would make it fairer and allow overall corporate rates to fall. It is difficult to understand how many large companies doing business in America pay no taxes or why they can save huge amounts of taxes by offshoring their main corporate office and where they claim to be located.

The Chained CPI Understates Inflation

The worst part of the new tax bill according to former congressman Ron Paul is that it adopts the chained consumer price index.The chained CPI is a way of measuring CPI that understates inflation’s effects on our standard of living. Chained CPI increases the inflation tax which may be the worst of all taxes because it is hidden and regressive. The inflation tax is not even a tax on real wages but rather a tax on the illusionary gains in income caused by inflation. The use of chained CPI to adjust tax brackets is designed to push individuals into higher tax brackets over time. So much for the promise of a middle-class tax cut. When looking past the illusion conjured up to garner public support, we get nothing except more debt.

The ugly fact is that tax reform or no tax reform, America is on course to rapidly expand its national debt in coming years. Starting in 2017 entitlements were, and are slated to expand to a point where they blow a massive hole through our budget. Deficit spending which has become a way of life has grown regardless of which political party is in power. In the race to bury our heads in the sand, Washington has lead the way and anyone who thinks after the failed promises to deliver quality healthcare at a reasonable price they are going to be able to churn out a fair tax reform package most likely also believes in unicorns.

Two last things to ponder, first, with tax reform in the news I came across an interesting comment which caused me to think about the psychology of taxation. The comment read; Removing more income earners from the tax rolls only reinforces the 'let the rich pay' perversion. In the end, this takes us further from individual responsibility and of course the intent of the Constitution. I interpret this to mean that if fewer people actually have skin in the game it could result in far less concern going forward for keeping spending in check. In some ways, the writer may have a point and this could unleash more spending and take the social friction of inequality to new levels. The second problem I see with quickly passing a bill that leaves computing the taxes we owe a complex drag on so many Americans is that it will put true reform on the back burner for many years.

Monday, November 13, 2017

For both political and economic reasons, poor recycling practices continue to haunt America and most of the world. The message that we should conserve our natural resources is vastly understated. It seems many environmentalists are asleep at the wheel and busy nibbling around the edges of the problem while massive abuses go unaddressed. While worrying about recycling things such as paper and plastic water-bottles they miss far more important areas. When we look at the amount of trash and rubbish created by developed nations an area where our failures are particularly glaring is in the recycling efforts, or better said, the lack of recycling efforts in the area of what is known as e-waste. Both an increase in population, as well as the growth of electronic devices per-capita, has created a disposal issue that the world has yet to address.

America's Sad Solution To E-Waste Disposal Falls Short

While issues like global warming make headlines the quantity of e-waste being generated has been on the rise, the total amount of e-waste produced is expected to reach 50 million tons in 2018, nearly 50 percent more than in 2010. The discarded products collectively known as e-waste include cell phones, TVs, air conditioners, appliances, computers, and solar panels. The sad truth is most are not recycled. There are two interconnected aspects to this global problem: a lack of awareness among the general public for the need to recycle e-waste, and a scarcity of sustainable options to actually do so.

To highlight just how pathetic society's efforts have been to address this problem and what a low priority this is I point to a recent announcement by the U.S. Environmental Protection Agency which recently announced it had awarded $100,000 to New York-based firm Advanced Recovery and Recycling, LLC. This money is to be used by the firm to continue its development of an efficient technology that recycles circuit board components. The firm’s innovation automatically and rapidly removes electronic parts from printed circuit boards, which are found in virtually all electronics. “This is accomplished without burning, smelting, or using chemicals, which reduces air pollution and electronic waste in landfills and incinerators,” the EPA stated. If the technology becomes commercially viable, the firm will be able to apply for a second federal grant of up to $300,000 to bring it to market.

It is apparent America's EPA cares little about stopping the source of future pollution yet is willing to spend billions on the back end trying to clean it up after it occurs. E-waste products contain heavy metals and when improperly disposed of they can leak toxins into the environment and water supply or into the air, in the case of incineration. Ironically, it is often the laws that exist in countries like America that are designed to protect the environment that make it very difficult to legally breakdown and recycle e-waste items. In fact, government rules as to how e-waste is handled, disposed of, and recycled add to and greatly limit the amount that is recycled.

The bottom-line is nobody wants to get involved with recycling the hard to deal with items because the government has made it so difficult to legally recycle these products within its so-called "safe" parameters. This means that business steers clear of this market because of the massive liabilities. Because precise figures do not currently exist, we have no clear picture exactly where all these discarded items come to rest. Shipping records indicate West Africa is one of the regions harmed most by e-waste, shipping records indicate large quantities of e-waste from around the world are dumped there, often illegally. Shortsighted manufacturers, governments, and consumers have created and greatly added to the problem of properly dealing with e-waste. It is obvious much of this could be addressed by the EPA stepping in and passing a law protecting and directing recycling firms on how best to process obsolete units rather than insisting this problem be swept under a rug. Recycling these items in a good way, if it cannot be done in a perfect way, is far better than our current solution.

The most encouraging news for e-waste recycling is that it can be done profitably. The potential of this so-called “urban mining” is enormous—the U.N. report estimated that the intrinsic material value of global e-waste was $54.5 billion in 2014, principally from gold, copper, and plastics. And as far as mining prospects go, e-waste is one of the better ones, especially when there are smartphones in the mix. According to 911 Metallurgist, a ton of recycled iPhones yield about 324 times more gold than a ton of ore from Peru’s Yanacocha gold mine, and 13 times more copper than a ton of ore from Chile’s Escondida copper mine. Another valuable component in smartphones is rare earth elements, these could also be pulled out and reused. Currently, less than 1% of REEs are recycled, so reusing them would not only save money but lessen global dependence on China the vast producer of a majority of the world’s REEs.

Some Recycling Methods Better Than Others

Granted, there are also toxic materials including lead and mercury in e-waste, that much processing and refining are necessary to extract the useful elements. But in aggregate and individually, the prize is very appealing. The report states that the gold content from e-waste in 2014 is roughly 300 tons, which represents 11% of the global gold production from mines in 2013. Still, the fact remains that many people simply don't care how they dispose of their e-waste so they slip it into the trash sending it to a landfill even though it is illegal in many states. This means it might be wise to increase efforts to collect e-waste and form massive holding areas where it can be stored until better recycling technology becomes available.

Many people might be surprised to find it is the Chinese government and local NGOs have been taking the challenge of e-waste most seriously. In 2013 China reported that it had recycled 28% of its e-waste in state-of-the-art facilities, a higher share than in the U.S. and Canada (12%) and Australia (1%). Since it began in 2012, a “Green IT Classrooms” program by Chinese NGO Netspring claims to have enabled the recycling of more than 20 tons of e-waste while providing IT education to more than 20,000 underprivileged kids. Likewise, India is trying to rein in and recycle its e-waste before things get out of hand. By 2020 the country predicts that it could recover some $4 billion from recycling its e-waste.

The Swedish firm Ericsson has proven gathering e-waste for recycling need not be difficult. For example, they recentlylaunched the campaign to drive the awareness and collection of e-waste in an African country. An e-waste collection station opened to the public at Sorbonne Plateau in the capital Abidjan for a period of four months with a 20-foot container serving as the collection depot. Citizens were encouraged to bring in old phones, computers and other electronic equipment to be disposed of in a safe and responsible manner. The container in effect acted as an education and awareness center manned by volunteers. At the close of the campaign, collected e-waste will be transported to an Ericsson-approved recycling partner in Durban, South Africa.Ericsson has made taking back and recycling its obsolete products a key part of its business– it provides free product retrieval and safe disposal services to all customers globally. The firm claims that when it takes back its products, over 98% of the materials are recycled. Ericsson’s “ecology management program” continues to expand its reach since it started in 2005 the program has taken back e-waste from more than 107 countries.

Most E-waste Is Dumped Or Buried And Not Recycled

Fortunately for concerned consumers, there are more and more opportunities to properly dispose of e-waste, much of which will be recycled. In the U.S. events put on by municipalities, businesses, and non-profits like the Boy Scouts, which typically accept e-waste free of charge. Presently, not all of these collection drives are free, have quantity limits, and some don’t accept all kinds of e-waste. It has become increasingly clear that many consumers are not willing to pay to dispose of e-waste junk, so the trend is for e-waste collection to be free and all-inclusive. And particularly as e-waste catches on as a source material for extracting valuable materials, firms will be eager to offer to recycle for free, since they will ultimately be earning money. Combined with reducing landfill intakes and environmental pollution, this is a growth industry that’s win-win for everyone.

A co-author of a recent study on Europe’s e-waste recycling potential thinks that recycled e-waste could eventually replace much of the virgin material currently coming from mines. This would require more top-down policy, meaning governments should collectively initiate a global directive to drive such an agenda. If life on this planet is to be sustainable resource efficiency and recovery should be embedded into every business and supply chain. As demand for recycled materials increases, and as more countries start to make manufacturers responsible for dealing with e-waste at the end of a products life, more designers would also start to change designs with recycling in mind. When products are designed so that they can be easily dismantled and disassembled for recycling it streamlines the path to sustainability reducing the need for energy in recycling downstream. While the way we are currently handling e-waste may fall short of being considered a "sin" it is indeed a slap in the face of mother nature.

Footnote; Interestingly the link for more information on the company the EPA gave a grant to has recently turned into a dead end. I have over time written several articles on the subject of the environment and sustainability below is the link to one of the most popular. As usual, your comments are welcome and encouraged.http://brucewilds.blogspot.com/2012/04/whats-in-footprint.html

About Me

Bruce Wilds is a contractor that owns real estate in the Midwest, his holdings include apartments and office complexes. He is anchored to reality and the economy as he maintains, designs, and leases buildings. This has made him keenly aware of rapidly changing lifestyles, this blog incorporates many of the experiences and knowledge from his hands-on business style, extensive travels, and studies of history, politics and economics.